The decision upheld a district court ruling that Yelp did not extort businesses to sell them ads

A federal appeals court has cleared Yelp of claims that it extorted businesses into advertising on its site by fabricating bad reviews about them.

A handful of small-business owners filed a class-action lawsuit against Yelp in 2010, claiming it tried to strong-arm them into buying ads by hiding or removing positive reviews, or penning negative ones.

The claims had already been dismissed in federal court, and the court of appeals on Tuesday upheld that decision.

The plaintiffs lacked the factual evidence to support their claims of extortion, the appeals court said. "The business owners failed sufficiently to allege that Yelp wrongfully threatened economic loss by manipulating user reviews," said the decision from the Court of Appeals for the Ninth Circuit.

The plaintiffs included an animal hospital in Santa Barbara, California, that said a Yelp sales rep had offered to hide their negative reviews if they purchased ads. Another plaintiff, a dentist, said Yelp removed positive reviews from her page after she declined to buy ads.

"We are obviously happy that the court reached the right result, and saw through these thin attempts by a few businesses and their lawyers to disparage Yelp and draw attention away from their own occasional negative review," the company said in a blog post.

Yelp says it has never altered a business rating for money. "We have always said the claims are without merit," said Vince Sollitto, Yelp's VP of corporate communications and government affairs, in an emailed statement.

Some industry watchers had expected the decision, and the Electronic Frontier Foundation filed a brief supporting Yelp's position in the case.

Still, the appeals court took quite a narrow view of extortion. Based on the U.S. Hobbs Act, "unless a person has a pre-existing right to be free of the threatened economic harm, threatening economic harm to induce a person to pay for a legitimate service is not extortion," appeals court judge Marsha Berzon wrote in the decision.

A less stringent reading of the law, she said, would classify a variety of legally acceptable business dealings as extortion. The threat of economic harm that Yelp leveraged was, at most, "hard bargaining," the court determined.

Meanwhile, Yelp said separately on Tuesday that it was stepping up its own efforts to flag businesses that manipulate their reviews on its site.

It said it had posted more than 60 new warnings on Yelp reviews, letting users know that it thought those businesses had paid people to post good reviews or used other banned tactics to improve their ratings.